AMRN NCE Decision Remains Key; TEVA Potentially In The Race To Buy Is Surprising But Secondary

Thursday morning, Israeli financial newspaper, Calcalist is reporting that Teva Pharmaceuticals (NASDAQ:TEVA) and AstraZeneca (NYSE:AZN) are leading candidates among other large drug companies interested in acquiring AMRN for its recently approved triglyceride lowering therapy, Vascepa. TEVA is a new name to be added to the list of potential suitors, but raises the question of whether the world’s largest generic drug company could or would build a large brand drug sales force that targets primary care physicians. Note that sales forces marketing cardiovascular drugs, like Vascepa, can require thousands of sales representatives, a major undertaking that would dramatically change TEVA’s business model. While the news is interesting, AMRN recently told investors that the FDA's decision on whether or not Vascepa gains NCE status is key to doing a deal with a partner or acquirer of the business (see prior story). To be sure, a potential acquirer of the company is unlikely to make a move prior to this important decision, and it would not make sense for AMRN management to accept any offers prior to hearing from FDA given that the price for the company will differ depending on the outcome. As a result, the TEVA speculation (AZN in the race is well known) is likely to take a backseat to the NCE news, with a decision (or no decision) expected Friday. A decision by the FDA to grant NCE status for Vascepa would be highly positive, sending the shares up to the $16-18 range based on our conversations with Wall St. investors. The thinking is that NCE status for Vascepa would lead to the announcement of an acquisition of the company before year end. No decision or a negative decision on NCE status could send the shares down below $10, perhaps as low as $7-$8, also based on investor opinions, as this outcome would signal that AMRN may have to spend its own resources to launch the drug on its own.

Our view is that the early morning rally in the stock fades as investors focus on the NCE decision, and realize that perhaps this morning's speculative article was meant to divert attention from the true trading issue at hand.